All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. But when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
Cash flow can come from bond interest, interest from other types of investments, and of course, dividends. A dividend is that coveted distribution of a company's earnings paid out to shareholders, and investors often view it by its dividend yield, a metric that measures the dividend as a percent of the current stock price. Many academic studies show that dividends make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Allstate in Focus
Based in Northbrook, Allstate (ALL) is in the Finance sector, and so far this year, shares have seen a price change of 17.74%. Currently paying a dividend of $0.5 per share, the company has a dividend yield of 2.06%. In comparison, the Insurance - Property and Casualty industry's yield is 1.5%, while the S&P 500's yield is 1.89%.
In terms of dividend growth, the company's current annualized dividend of $2 is up 8.7% from last year. Allstate has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 13.27%. Future dividend growth will depend on earnings growth as well as payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Allstate's current payout ratio is 23%, meaning it paid out 23% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for ALL for this fiscal year. The Zacks Consensus Estimate for 2019 is $8.90 per share, representing a year-over-year earnings growth rate of 10.29%.
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. But, not every company offers a quarterly payout.
Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. Income investors have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, ALL is a compelling investment opportunity. Not only is it a strong dividend play, but the stock currently sits at a Zacks Rank of 3 (Hold).
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The Allstate Corporation (ALL) : Free Stock Analysis Report
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